The first virtual currency, Bitcoin, was created in 2009 by Satoshi Nakamoto following the subprime financial crisis that took place in 2008. This year, some believe that investing in cryptocurrency is more profitable than ever, more still only in 2020. So, how to invest in Bitcoin this year? Is it a good idea?
Investing in Bitcoin (BTC) is attracting more and more interest. Investors including individuals are increasingly interested. In this guide, we explain why and how to invest in Bitcoin and the best brokers to do so. Then, we will explain in particular why to choose Bitcoin compared to other crypto currencies, how much money can we place there, while wondering what are the gains to be hoped for.
Find out more about the steps to take as a beginner, as well as the pitfalls and risks associated with cryptocurrencies.
What is bitcoin?
Bitcoin (BTC) is a cryptocurrency (the most popular in the world), that is, a virtual currency (which does not have a physical representation). A cryptocurrency is not guaranteed or recognized, neither by a state nor by an official financial authority. It is therefore completely independent of banking networks, and its value totally speculative.
However, to ensure its reliability and the traceability of transactions, a virtual currency must use a protocol (the blockchain), as well as cryptographic algorithms, which are very long and complex calculations.
What is blockchain?
It is an information storage and transmission technology that eliminates the need for a centralized control body (since information is distributed and stored on a peer-to-peer network rather than a central point). As a reminder, “peer-to-peer” defines a peer-to-peer computer network model between computers, which distribute and receive data or files. Note that this blockchain technology is not limited to finance.
In short, when it comes to cryptocurrency transfers, the blockchain makes it possible to replace the intermediary with a collective verification of the ecosystem, which offers a relatively high degree of traceability, security, but also speed.
Where and how to buy BTC?
There are multiple platforms for buying BTC. For beginners, it is recommended to use the American platform Coinbase, which is certainly not the cheapest, but it is the most popular (with more than 35 million customers in a hundred countries) and it is available. Creating an account only takes a few minutes and requires a copy of an identity document. In fact, it is quite similar to the process of opening an online bank account.
Please note, since it will be a question of money, use a unique and complex password to access your account. The longer it is, the more effective it will be. Ideally, it should be at least 12 characters long and consist of a mix of characters, namely: lowercase letters, uppercase letters, numbers and symbols. Moreover, do not hesitate to configure the two-step verification to further secure your account.
How do I transfer my profits to my current account?
The day you want to recover all or part of your BTC in euros, you will simply have to do the opposite movement, that is to say, transform the BTC amount of your choice into euros (via a sale procedure) and then transfer these euros to your current account via a SEPA transfer. Please note, each of these steps obviously comes with transaction fees. Good to know: in the world of cryptocurrency, state currencies – for example the euro or the dollar – are called “fiat” currencies.
How to make a payment?
To send BTC, you must request an alphanumeric receiving address from your recipient. Such an address is unique and always begins with 1 or 3. For example: 3KoBM5V2phca44YiopsshBTVEoqg3SJYCp. All you have to do is click on Send from your BTC Wallet and copy and paste this address. Double check this address because, once you confirm the transfer, it is not possible to go back at all.
Conversely, if you want someone to pay you in BTC, click on Receive from your BTC Wallet and it will display the address to transmit. This address is private, but anyone can still see what you have sent or received through it.
What are Exchanges?
This term corresponds to cryptocurrency exchange places. Coinbase is one of them, but there is also Binance, Kraken or even Bitfinex. Note that cryptocurrency trading is rather reserved for investors with a little more experience. You don’t have to get there. You can invest small amounts in BTC for the simple purpose of diversifying your savings, but with the risk of losing all or part of this investment.
Is there a capital gain tax?
Given that the exchanges of BTC are not regulated and are made from foreign platforms, the tax authorities do not have precise data on the quantity of BTC held by Belgian taxpayers. This is why it is up to investors to declare their capital gains themselves.
The tax rate differs depending on whether it is an investment as part of the “normal” management of private assets, a speculative investment or professional income.
The border between the “normal” management of private assets and a “speculative” investment is a question of fact. Case law generally examines whether the investor uses professional expertise, the number of transactions and their frequency. It is up to the tax authorities to demonstrate that this is a speculative investment.
What if I inherit BTC?
Here, too, there is little chance that you will be taxed. “For example”, explains lawyer Jérôme Havet, “the person, a doctor by profession, who inherits BTC bought in 2013 by his parents who kept them without ever carrying out any other operation (stacking) and sells them in 2021, will be less likely to be taxed than someone who invests all his savings in BTC at the end of 2020, resells them 4 months later, uses bots or mines and is also employed in a trading room of a bank in Brussels.”
How to buy Bitcoins?
First, you have to find out about the platform on which you want to buy. Find out more about the payment methods available on each platform. On some sites, you can pay by credit card or PayPal, on others, only one way will be possible. You must keep in mind that payment by cryptocurrency is not usable in everyday life. In addition, it is an investment that remains uncertain. If some consider theinvestment in Bitcoinas a future source of income, this technology could involve the loss of the money invested.
Why invest in Bitcoin?
There are thousands of virtual currencies. To choose the one that suits you the most, you will have to do your own research before buying Bitcoin or any other active crypto. We advise you not to bet all your capital on a single active crypto, the price of each cryptocurrency being unstable.
If you can afford it, favor the most popular cryptocurrencies, which are therefore the most capitalized, such as Bitcoin (BTC). First virtual currency created in 2009, in response to the economic crisis hitting the world, Bitcoin remains the safest currency in the financial markets. However, making the choice to invest in inexpensive cryptocurrencies today can also turn out to be a successful bet: some tokens only cost a few cents, but there is no guarantee that they will increase in value in the months or years that follow.
Is it time to buy Bitcoins?
Some argue that 2021 may be the perfect year to invest in cryptocurrency. Indeed, the increase in value of Bitcoin depends on the quantity of Bitcoins created each year. However, it is expected that the creation of bitcoins will be halved every four years. As was the case between 2013 and 2017, the decrease in the amount of Bitcoins created means an increase in its demand, and therefore in its value.
Therefore, buying Bitcoin in 2021 could allow you to create a portfolio of crypto assets that will increase in value as the number of Bitcoins created decreases. In addition, by the end of 2021, Diem (ex-Libra), the virtual currency of the Facebook group, should establish itself as a means of payment already accepted by many groups such as Uber, Whatsapp, Spotify, eBay, etc.